Redrow dismisses ‘lost decade’ housing claim

Steve Morgan, the chairman of housebuilder Redrow, says there is a “tidal
wave” of first-time buyers trying to get into the housing market and
dismissed City research questioning whether the UK has a housing shortgage
as a “load of b*****ks”.

Mr Morgan, who also owns Wolverhampton Wanderers football club, was speaking today as Redrow reported an 80pc rise in first-half pre-tax profits to £15.3m thanks to building a greater proportion of more expensive family homes.

In a note published on Wednesday, Collins Stewart analyst Alastair Stewart said the housing market could face a “lost decade” and that warnings the UK needs 240,000 new homes a year are based on “bunkum” projections.

However, Mr Morgan said: “What is he smoking? It is a bit like saying it is not going to get dark tonight.”

He said Redrow has had over 6,000 people inquire about the mortgage indemnity scheme launched by the Government, called NewBuy, which will encourage lenders to offer 95pc loan-to-value mortgages by underwriting potential losses.

“We are seeing people say that if prices are stable, it is time to buy,” Mr Morgan added. “There has been a change in confidence.”

However, in a new note, Mr Stewart warned the NewBuy scheme “may well fall short of the hype” because there is a reluctance among banks to offer 95pc mortgages and they could charge high interest rates.

Mr Stewart said in his original note that proposals to boost mortgage lending from the Coalition could backfire and leave first-time buyers in negative equity as house prices fall.

“UK housing could be stuck in a lost decade, with tight lending putting pressure on prices and record low volumes," he said.

Mr Stewart, who put a 0p target price on housebuilders Taylor Wimpey and Barratt Developments following the collapse of Lehman Brothers, warned of “at least two or three years of steady house price erosion”.

The property analyst said one of the main reasons for the prediction of falling prices is that the “decades old near-mantra” that there is a structural shortage of housing in the UK is based on “flimsy evidence”.

The Collins Stewart research claims the UK has been building double the rate of population growth for 20 years and is in line with the main European countries. It says 11,000 “hidden” homes are built every year that are not officially recorded in construction figures but are picked up by tax authorities.

“We believe that periods of rampant house price inflation have more often been caused by over-supply of capital rather than under-supply of housing – the northern buy-to-let boom of the last decade being a prime example,” Mr Stewart added.